PayPal makes its ‘Happy Returns’ service free with PayPal Checkout, expands to 5,000+ locations

PayPal is expanding access to the returns service it acquired last year, Happy Returns, by making it available to PayPal Checkout merchants at no extra cost. The payments company said on Monday that merchants would now be able to use the Happy Returns return and exchange portal software free of charge, and it has additionally partnered with Ulta Beauty to roll out Return Bars to more than 1,300 Ulta locations across the U.S.

The Ulta Beauty expansion will begin with select retail stores initially, then reach more locations throughout the year.

This is the first major effort PayPal has made with Happy Returns since its 2021 acquisition of the software and logistics service.

Since then, the number of Return Bar locations has almost doubled, from 2,600 at the time of the deal to now more than 5,000, with the inclusion of Ulta Beauty. These Return Bars are available across the U.S., and PayPal notes that 78% of Americans now live within a 10-mile radius of one of these locations.

To use the returns service, customers don’t have to visit a separate website. Instead, if a retailer supports Happy Returns, the customer will begin the return process directly on the retailer’s website. In doing so, they’ll receive a QR code they can bring to their nearest Return Bar location along with their item, if the merchants supports this. They don’t need to package the item or bring a box or label. When their QR code is scanned, customers receive an immediate refund. The item is then placed in a reusable tote alongside other returns at that location. This tote is picked up and sent to a processing facility, which reduces the number of shipments that need to be made, PayPal explains.

Happy Returns retail partners will display in-store signage at the store entry and at checkout to alert customers about the service. Plus, after returning the item, the customers receive a coupon from the location’s retail partner to incentivize them to make a purchase while in the store. The process is similar to how Amazon returns work at its own retail partners, like Kohl’s.

Use of the service has been gaining adoption over the past year, as adoption of online shopping continues to grow. PayPal says in-person returns at its Happy Returns Bars were nearly four times greater in February 2022 than in February 2021, for example. It also doubled the number of retailer partners from 2020 to 2021, which now includes Everlane, Rothys, Gym Shark, Mack Weldon and others. In addition to Ulta Beauty, shoppers can take their returns to supported retail locations like Staples, FedEx, PaperSource, Cost Plus World Market and more.

For PayPal merchants, Happy Returns will now be available at no extra cost, but PayPal’s Checkout fees will still apply. Merchants can also opt to use the software and portal to manage their returns and exchanges, without also using the Return Bars network across the U.S. The software helps to automate returns and exchanges in a more user-friendly experience, PayPal says, and offers merchants a dashboard where they can run detailed reports of returns data and respond to returns-related customer inquiries in real time.

Those merchants who do offer support for Return Bars will pay additional fees, which PayPal won’t publicly disclose. But PayPal notes customers will save through aggregated returns shipping and discounted carrier rates.

“Though consumers have increased their frequency of online shopping, returns are commonly an ‘in person’ experience and are costly and challenging for merchants,” said David Sobie, vice president, Happy Returns by PayPal, in a statement. “Our partnership with Ulta Beauty widens our in-person drop off network and gives online shoppers more options to complete returns—Return Bars bring new customers into stores and give merchants a more cost-effective and practical way to manage their reverse logistics.”

PayPal didn’t disclose how much it paid to acquire Happy Returns, but noted in an SEC filing it was one of four acquisitions in 2021, not including Paidly, which together totaled $542 million. PayPal had earlier been a strategic investor in the company, which had been valued at $55 million after its 2019 B round, per PitchBook data.

Happy Returns’ service is designed to make it easier for smaller merchants to compete with e-commerce giants like Amazon and Walmart, both of which enable easy returns for their customers by way of their brick-and-mortar footprints — Amazon with its Whole Foods’ locations, its other retail stores and various partners, and Walmart with its own stores. The potential foot traffic that comes from offering an Amazon returns desk or locker system in-store has since led retailers like Kohl’s and Stein Mart to embrace the enemy by catering to shoppers with Amazon returns in their own stores.

Ulta had piloted the Happy Returns service before today, and similarly reported it was “encouraged” by the increased store traffic and in-store engagement it saw as a result.